Mortgages

Mortgages can be one of the biggest commitments you will make in your lifetime. Whether you have a mortgage right now or are going to apply for a mortgage, or even refinancing your mortgage, the process can be daunting. It has become even more daunting with some of the new rules that have come into effect earlier this year.

Qualification

Qualifying for a mortgage is based on four main factors:

Gross annual income

Down payment

Assets and liabilities

Credit history.

Downpayment

This is very important. Especially so if you are putting down less than 20%. If you put down less than 20%, then you will need to get mortgage default insurance. Now for the shocker – mortgage default insurance may cost you almost as much as a downpayment! So it may make more sense for you to try and save 20% downpayment.

Closing Costs

So you have a downpayment. Don’t stop there. You have to also consider closing costs which can range from 1.5% to 4% of the cost of your home. if you want to purchase a home make sure that you have extra funds. Closing costs are NOT included by your lender. Additionally

1.5% of $300,000 = $4,500

2% of $300,000 = $6,000

3% of $300,000 = $9,000

4% of $300,00 = $12,000

New Stress Test Rules

As of January 2018, a new minimum qualifying rate, or “stress test,” has been put in place for uninsured mortgages. The guideline requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%. What this means is that you may actually pay a lower rate than you qualify for.

Want to join a conversation about the path to home ownership?

Whether you are buying a home or refinancing an existing home, it is important to make informed housing finance decisions that will help make homeownership viable and affordable over the long term. Tangerine Bank is hosting a twitter party with one of their mortgage specialists, George Kibalian. Sean Cooper, bestselling author of #BurnYourMortgage. Sean is mortgage-free, paying off his mortgage in 3 years by age 30 will also be on the chat. Additionally, Preet Banerjee, independent personal finance commentator, broadcaster, author, and speaker will also be on hand to answer your questions.